By Karim Hammam
UK Business Secretary Jonathan Reynolds has written to the owner of Poundland amid fears the discount retailer could collapse into administration, threatening 12,000 jobs and potentially overshadowing Chancellor John Healey’s first budget.
Administration fears grow
Poundland, which operates 600 stores across the UK and employs 12,000 staff, was bought by US investment firm Gordon Brothers for £1 last summer. Sources indicate Gordon Brothers is poised to file a notice of intention to appoint advisory firm AlixPartners as administrator, a move that would protect the company from creditors for 10 days while a solution is sought. Three independent directors appointed to oversee a sale have resigned amid disquiet over the move towards insolvency.
Bid rejected and supplier concerns
The company rejected the only bid for the group as a solvent entity, from Northern Ireland’s Martin Property Group, earlier this week. That bid was valued at more than £15 million, with only a portion upfront, well short of the £30 million in debts Gordon Brothers took on. Suppliers have reportedly begun holding back deliveries, complicating rescue efforts.
Government and union response
Reynolds instructed his chief strategic business adviser, David Bickerton, to “establish the facts” regarding Poundland’s potential collapse. A business department spokesperson acknowledged concern for employees but said the process is commercial and a decision for the owners. The Union of Shop, Distributive and Allied Workers general secretary, Joanne Thomas, called on the government to save 11,000 jobs, mostly held by women and part-time workers.
Potential break-up and buyers
Gordon Brothers believes it can raise up to £30 million and preserve more jobs long-term by breaking up Poundland and selling stores and stock to multiple retailers. Interested parties may include Fortress, which owns Poundstretcher, the owner of The Range, and B&M. However, industry insiders warn that up to 500 of the 600 stores could be left without a buyer, leading to significant job losses.
